The Dynamics Behind Economic Shrinking and a Case of Recent Disappearance

Abstract: The present research aims at finding the underlying factors that contributed to the recently observed disappearance of economic shrinking in Ethiopia, defined as negative rates of GDP per capita growth. Within the framework of the Theory of Shrinking (Broadberry & Wallis, 2017) it sheds light on structural, technological and demographic change, the occurrence of warfare as well as institutional change over the course of four decades. The results indicate that stable growth of agricultural output, the pacification of the Ethiopian-Eritrean war and more space for civil society, opposition parties and the private sector correlate with the economy’s improved resilience towards shrinking. Still, the country remains a limited access society that is largely based on small scale agriculture, facing reoccurring ethnic tensions and a starting demographic transition. Furthermore, the legislative period following the 2020 elections ought to prove whether the widening of the space of opposition parties, civil society groups and the private sector can sustain and expand further.